Egypt telecoms market
05 August 2011 | Kavit Majithia
“This revolution started online. This revolution started on Facebook. This revolution started in June 2010 when hundreds of thousands of Egyptians started collaborating content.”
This was the statement made by Egyptian political activist and Google employee Wael Ghonim, one of the key figures in organising the first major uprising against Hosni Mubarak’s regime on January 25, 2011 through a series of video and forum posts across the internet. This protest was dubbed as the “day of revolt” against the prime minister’s 30 years in power and the sheer impact of the internet on this momentous occasion was shown two days later when Mubarak ordered the shutdown of all access to internet content for five days, costing the Egyptian economy up to $90 million. Just over two weeks after this, the revolution gained further traction and Mubarak was forced to resign from his post with the country taken under martial law. The role of the internet, social networking and its ability to unify the masses in Egypt and around the Middle East is now accredited with changing the history of the country forever.
Low rates and high usage could be attributed to perhaps the most important element of Egypt’s telecoms sector – the country’s access to the Suez Canal. Since Egypt achieved Suez’s independence in 1956, it has served as a trading centre for Egypt to the rest of the world in numerous industry sectors, and telecoms is no different. With the ability to link Africa and Asia to the Mediterranean, Egypt has served as a gateway to Africa and the Middle East for the west, and now the Gulf states in particular are ever more dependant on Egypt’s fibre-optic corridor to connect to the rest of the world. In fact, much of the connectivity between Europe and Asia passes through Egypt. “Considering the importance of connectivity, the revolution was a nervous time for the world because there is such a vested stake in a prosperous, stable Egypt,” said Jawad Abbassi, founder and general manager at Arab Advisors. “The shutdown of the internet by the previous regime was a major disservice to Egyptian telecoms considering the markets it serves. There has been some shattered confidence and the world will be looking at the upcoming government, and if it will respect information flow here and internationally.”
As in most developed or developing markets, the growth of mobile broadband in the region has exceeded all projections. BuddeComm notes mobile broadband is continuing to grow at annual rates of 200%, with the three major operators, Mobinil, Vodafone Egypt and Etisalat, acquiring strategic controlling stakes in data and ISP providers LINKdotNET, Raya Telecom and EgyNet respectively early in the boom period. Egypt was one of the first countries in Africa to launch 3G after three mobile licences were sold for record prices in 2006, and a fourth licence is scheduled for 2013. The potential in the mobile market is clear, considering incumbent operator Telecom Egypt’s long-standing interest in adding to its 45% stake in Vodafone’s Egyptian offering and attaining a controlling share.
By the time of the elections in Egypt, there is an issue of where Telecom Egypt will sit in the country’s political landscape. Despite part-privatisation in 2005, when a 20% share of the company was sold to retail and institution investors, the company is majority state-owned and offers the country’s largest fixed-line, wholesale and internet services with 11.4 million subscribers. “The regional revolution has driven the adoption of some telecoms services for existing users, but it has not helped in adopting additional users or investors,” notes Barhoush. “Egyptian regulators had plans to further liberalise the fixed market but this was halted by political instability. This instability creates an inhibiting investment atmosphere for local and international investors and needs to be resolved.”